Preparing for Letdown
A security firm has estimated that the operating profit of Samsung Electronics in the second quarter would drop down to the 6 trillion won (US$5.3 billion) level, and the market’s expectations of the company’s performance have also been lowering.
WISEfn, a financial information provider, said on July 3 that 23 securities companies anticipated the Korea IT giant’s operating profits in the second quarter would reach 7.1947 trillion won (US$6.4073 billion) on average as of July 2, down 3.4 percent from 7.4256 trillion won (US$6.6129 billion) a month earlier.
Though the market’s general expectation remains at the earlier 7 trillion won level, more pessimistic forecasts are coming out. In particular, Daishin Securities has forecast that Samsung’s operating profits would only reach 6.689 trillion won (US$5.9570 billion) on the previous day, which was the lowest among those made by securities firms.
The main reason for the lower than 7 trillion won forecasts of Samsung’s performance is the sluggish sales of its flagship smartphone, the Galaxy S6, in the quarter. The popularity of the iPhone 6, which was launched at the end of last year, has continued until the first half of this year, absorbing a considerable amount of consumers. Moreover, Samsung Electronics failed to supply enough Galaxy S6 Edges to meet market demand after underestimating its popularity. All of this led the conclusion that the annual sales of the Galaxy S6 this year would stand at the level of just 45 million units, smaller than the original estimate of 50 million sales.
A decrease in semiconductor prices also contributed to the disappointing performance of Samsung Electronics. The semiconductor industry saw the price of dynamic random access memory (DRAM) drop by around eight percent quarter-on-quarter. Samsung Electronics’ operating profits was above 3 trillion won (US$2.7 billion), but it could have been more without the price drops.
Countering the lower-than-expected performance forecasts, the IT & Mobile business unit of Samsung Electronics is considering a strategy to diversify its smartphone models. The company has been known to release Edge and Plus versions of its flagship smartphone between the launches of new Galaxy S series' made every May and Galaxy Note series made every Sept. Samsung Electronics plans to create a sensation by launching its ace-in-the-hole “Samsung Pay” service along with the Galaxy Note 5 in Sept.
The semiconductor sector is known to have made about 3.2 trillion won (US$2.8 billion) in operating profits in the second quarter, surpassing the 2 trillion won mark made in the previous quarter. In particular, the performance of its non-memory System LSI business unit is expected to improve, as the company’s smartphones increasingly use the company's own mobile application processor Exynos.
The sharp growth of the Internet of Things cloud market can also contribute to an increase in the demand for server and computing semiconductors.